A Normative Evaluation of Tax Law Enforcement: Legislative and Political Responses to Tax Avoidance and Evasion

The premise of this article is that there exist equilibrium between the fairness of a tax and the moral obligation to pay. In the context of tax avoidance, the question arises how much tax should be considered to constitute a fair share for an individual person or corporation. Current doctrine seems to accept that the law provides a bandwidth for fair share, and tax reduction planning within the bandwidth is acceptable. The scope of the obligation to pay fair taxes, and the moral legitimacy of enforcement methodology used by tax authorities in coercing compliance with tax laws also constitute a moral or normative equilibrium: the wider the scope of tht obligation to pay, the further the reach of tax law enforcement; and, the narrower the scope of the obligation to pay, the shorter the reach of tax law enforcement. Tax law enforcement requires a degree of proportionality. Proportionality in this context means a cost/benefit analysts of any enforcement measure, including the impact of enforcement measures on bona fide taxpayers. On the basis of the normative standards developed in the first part of this article, three more recent developments in the area of tax law enforcement will be evaluated, namely the OECD fight against tax havens; the US Foreign Account Tax Compliance Act (FATCA); and the practice of public shaming in the UK.